Card Pact's Foes Arm for Battle

A trade association representing some 3,700 convenience stores and other companies has hired a longtime legal foe of Visa Inc. V +1.18%and MasterCard Inc. MA +1.26%to help challenge last week's $6.6 billion lawsuit settlement between the credit-card industry and merchants.

The National Association of Convenience Stores says the pact, announced on Friday, doesn't address the core issue of how much control Visa, MasterCard and card-issuing banks have over the merchants who accept their cards for purchases. The Alexandria, Va.-based group hired Constantine Cannon LLP, a New York law firm that previously tangled with Visa and MasterCard over debit-card fees.

The reaction of convenience stores is the most direct response to the settlement, which, aside from the monetary payment also gives merchants the right for the first time to charge customers more for using credit cards. Visa and MasterCard also agreed to an eight-month reduction in the rates that merchants pay card-issuing banks to accept credit cards, known as interchange fees.

In return, Visa and MasterCard hope to close the door on the interchange-fee fight that has dragged on for years.

"This is a deeply flawed deal that will perpetuate the current system, while giving Visa and MasterCard broad legal cover going forward," said Jeffrey Shinder, managing partner at Constantine Cannon.

The trade group says the settlement doesn't go far enough. For example, it says, the pact doesn't stop Visa and MasterCard from ultimately raising merchant fees.

Constantine Cannon has plagued the credit-card industry for years. The firm represented retailers, led by Wal-Mart Stores Inc., WMT +1.20%in suing Visa and MasterCard over debit-card rules in 1996. The suit was settled in 2003, with Visa and MasterCard agreeing to pay $3 billion.

Merchants large and small are evaluating Friday's settlement. They also are deciding whether they want to impose surcharges —a tricky question for many retailers because they risk angering customers who prefer credit cards for purchases. The case is expected ultimately to include millions of merchants who believe they have been hobbled by the industry's fees and rules.

Already, plaintiffs including supermarket chains Kroger Co. KR +0.73%and Publix Super Markets Inc., drugstore Walgreen Co. WAG +1.59%have signed on.

Industry experts said that the hotels and airlines are among the industries that may be most likely to impose surcharges because their customers don't typically pay any other way.

Hyatt Hotels Corp. doesn't plan to impose surcharges, a company spokeswoman said.

The convenience-store group is one of a number of trade associations that has been vocal about the interchange fees in recent years. It was among the trade groups that recently filed a lawsuit against the Federal Reserve, challenging the way the central bank implemented new restrictions on debit-card fees that are part of the Dodd-Frank financial overhaul law.

The trade group also is being represented by law firm Steptoe & Johnson LLP in Washington.

Representatives of San Francisco-based Visa and MasterCard, which is based in Purchase, N.Y., declined to comment on the firm's hiring.

The opposition expressed by the convenience-store group "should not take anything away from the fact that this has been very broadly embraced by major participants of both industries," said Bob Stolenberger, a lawyer for the Electronic Payments Coalition, which represents Visa and MasterCard and other payments companies.